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Tuesday, January 6, 2015

Daily update 1/6 What a start to the year

The buying did not last long this morning.  It didn't take much higher prices to bring out the sellers again.  Here is the daily SPX chart.

SPX closed slightly below the 100 SMA.  This has been a buy signal since June 2013.  Even in Oct. when the market went down below the 200 SMA it put up a fight at the 100 first.  We are oversold enough in the short term to bounce.  Just a question if the dip buyers have the will or not.  Breadth was 65% negative which is still pretty high.  There were 152 new highs and 124 new lows.  That is quite a few new highs and indicates money is moving around inside the market rather then fleeing.  That suggests there is no panic, but instead longer term positioning.  Lets see what the futures chart has to show us.

The futures dropped below the 200 SMA.  They are up a few points tonight once again as I write this.  That did not help much today.  People were much more interested in selling the gap up then buying it.  With ADX this high I would want the -DI line to get below it before talking about a possible short term bottom. Let the bulls prove themselves.  They keep getting hit over the head at the moment.

While the rapid drop in the price of oil might not be bothering retail investors it is starting to worry money managers.  They are certainly hitting the bids quite regularly.  This market is in runaway mode on the down side.  Until it does something different there is no reason to fight it.  The market action since Oct. is telling us things are different then they have been the last few years.  While a close below the 100 DMA has been a signal to buy for a run to new highs, that pattern may be breaking down now.  Things appear to be different and we must adapt. 

Here is some interesting data on the start of the year.

While past history is only a guide as to what might happen it is clear this year is not starting out good.  We have a technical condition that looks very much like the 2000 and 2007 tops.  We just had a down Dec., a failed Santa rally, and the third worst start to the year since 1950.  The break out to a new high by IWM failed spectacularly.  There are too many things wrong here to ignore.  This looks like it is probably the start of a bear market.  At the very least I think we are headed for the biggest pullback since 2011.  Plan accordingly.


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